Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Power Washing Business Sold at 900x EBITDA with City Contracts
Transcript
- Lucas: So we've spent a lot of episodes on recurring revenue — membership data, route density, subscription models. The conventional wisdom is that you need some form of stickiness to get a high multiple. Luna: Right, the whole 'sell it for 200x EBITDA because the customer comes back every month' story. Lucas: Exactly. Well, today's deal flips that on its head. A power washing business in Phoenix just sold for 900 times EBITDA — and it had zero recurring revenue from individual customers. No route density. No subscriptions. No memberships. Luna: Wait, 900x? That's… I mean, we've seen 500x, 600x, but 900x is almost unheard of for a service business. Lucas: And here's the kicker: it's a power washing company. Not software, not a niche medical device. A guy with a pressure washer and a truck. Luna: Okay, you have to explain this. What was the secret sauce? Lucas: One city contract. The City of Phoenix had hired this company for graffiti removal on public buildings and overpasses. It was a five-year contract with auto-renewal clauses. The city had to give 18 months' notice to cancel, and they'd never done it. Luna: So the buyer was essentially buying a guaranteed revenue stream from a very creditworthy counterparty — the city government. Lucas: Exactly. And the contract was priced at about $1.2 million a year. The business's total EBITDA was only about $12,000 — the owner took a minimal salary and the margins were thin because he was doing other small jobs that barely broke even. But the city contract alone was worth well over a million in annual revenue. Luna: And the multiple was based on that contract, not on the overall EBITDA. Lucas: That's the whole story. The buyer — a private equity firm that focuses on government services — valued the contract at 900x the $12,000 EBITDA because they saw it as a near-certain annuity. They'd done similar deals with janitorial companies that had city contracts. Luna: I think we should pause here. A lot of business owners hear these multiples and think, 'My business is worth 900x EBITDA' — but that's not the right takeaway. Lucas: Absolutely not. This was a very specific situation. The power washing owner had essentially built a single-client business, but that client was a municipality with a legal obligation to maintain public spaces. The risk profile was almost like a municipal bond. Luna: And that's part of what makes these stories interesting — the outliers. But I know some listeners are wondering how we even find these deals. And while we're on that, I'll mention something quick. Lucas: Sure, go ahead. Luna: This show is listener-supported. A small group of you chip in monthly through buy me a coffee dot com slash fexingo, and that's what keeps us ad-free and able to dive deep on these cases. If these conversations have moved your work forward in some small way, that's the place to help keep them going. Lucas: And truly — no pressure. We're grateful for everyone who listens. The support we get already lets us spend hours on research for each episode. So thank you if you're part of that. Luna: Back to the power washing deal. Lucas, how did the broker even pitch this to the buyer? I mean, on paper the business looked like a marginal operation. Lucas: The broker told me they didn't even bother with a traditional CIM. They sent a one-page memo that listed the city contract, the renewal history, and the fact that the city had never gone out to bid on this service in over a decade. The buyer's response was basically, 'Where do we sign?' Luna: So due diligence must have been fascinating. What did they look at? Lucas: The buyer spent almost no time on equipment or employees. They focused entirely on the contract language. Did 'auto-renew' actually mean auto-renew? Were there any performance clauses that could void it? They found that the city had a 'satisfactory performance' clause, but in 12 years, they'd never issued a single formal complaint. Luna: So the owner had effectively built a moat — not through technology or branding, but through a decade of reliable, boring service. Lucas: That's exactly the phrase the broker used: 'boring service, but essential.' The city didn't want to switch because they knew the work would get done. The owner never missed a deadline, never sent an invoice late. He was dependable. Luna: What was the purchase price in absolute terms? We talk about multiples, but give us a number. Lucas: The deal closed at $10.8 million. That included the business assets — two trucks, pressure washers, a small office — and the contract assignment. The owner walked away with about $9 million after taxes and broker fees. Luna: And the buyer's plan? They're going to layer other city services on top of that contract. Lucas: Yes. They already have a janitorial division that cleans city buildings, so they plan to cross-sell. They think they can double the revenue from that contract within two years by adding sidewalk pressure washing and alley cleaning. The city is open to it because they already trust the company. Luna: That's the real lesson for business owners, I think. It's not about building a massive enterprise. It's about becoming indispensable to a single high-quality client, and then finding a buyer who values that relationship. Lucas: Exactly. And let's put a fine point on it: this owner didn't have a fancy CRM. He didn't have route optimization software. He just answered the phone, showed up on time, and sent a clean invoice. That's it. Luna: It's almost like a retirement plan. He built a job that paid well, and then sold it for millions because the buyer saw it as a platform. Lucas: And the broker fee — I should mention — was 8% of the purchase price. So the broker made over $860,000 on this deal. That's a good payday for a one-page memo. Luna: Well, and for knowing who to call. The broker had a book of PE firms that specifically target government-adjacent services. That's the real value. Lucas: Right. A generalist broker might have tried to sell this as a 'power washing business' and gotten laughed at. But this broker knew exactly which buyers would see the contract for what it was. Luna: So if you're listening and you have a business with a single large client — especially a government client — what's the takeaway? Lucas: First, document everything. The owner had a file folder with every email from the city for the past 10 years. That made due diligence trivial. Second, make sure the contract has strong renewal terms. Auto-renewal with a long notice period is gold. And third, find a broker who specializes in your client type, not your industry. Luna: I think that last point is the most important. We've seen so many deals where the multiple came from the buyer's thesis, not the business itself. Lucas: And that's the beauty of private sales. You're not selling to the public market. You're selling to one person or one firm who sees value that no one else does. Luna: I'd love to know what the owner did next. Did he retire? Start another business? Lucas: He bought a house in Sedona with cash and started a consulting firm advising other small business owners on how to land city contracts. He's already got three clients. Luna: So he turned his one-trick pony into a training business. That's a pretty nice outcome. Lucas: It is. And it shows you don't need to be the next tech unicorn. You just need one great relationship with a buyer who sees the future you've already built. Luna: Alright, next episode we're looking at something completely different — a landscaping company that sold for 300x EBITDA with recurring contracts, but with a twist. Lucas: Looking forward to it. See you then.